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No used games means lower profits for game makers. Unless...
No used games means lower profits for game makers. Unless...
May 29, 2013 | By Mike Rose

May 29, 2013 | By Mike Rose
More: Console/PC, Business/Marketing

As the debate rages on regarding how the next generation of consoles will handle used game sales, a recent study has found that if console manufacturers eliminated used game sales, the move could benefit the game industry.

The catch is that in order to reap any benefits, game makers would have to lower prices on new games, too.

As spotted by Wired, the study titled "Dynamic Demand for New and Used Durable Goods without Physical Depreciation: The Case of Japanese Video Games" surveyed 20 retail video games between 2004 and 2008.

For the study, released in December 2012, Masakazu Ishihara of the New York University Stern School of Business and Andrew Ching of the University of Toronto's Rotman School of Management pulled Japanese sales information from several sources, including weekly Famitsu rankings, and weekly average retail and resale values.

Through a series of mathematical equations, the pair reasoned that if the console manufacturers were to eliminate used game sales, this would cause an overall drop in profits of around 10 percent.

This is due to the fact that consumers take into account the eventual resale value of the games that they purchase, and removing the ability to resell games would cause some consumers to simply buy less games.

However, the report suggested that if the console manufacturers were to eliminate used game sales, and simultaneously lower the average price of video games by around 33 percent, they could potentially see their average profits per game jump by 18.6 percent.

"So roughly speaking, in the U.S., game prices should go down to about $40," Ishihara told Wired. "The reduction in price is partly driven by the fact that if the used game market were eliminated, gamers would no longer be able to sell their games and get back some money (so they need to be compensated)."

The report doesn't delve into what exactly would happen to retailers under these circumstances -- an issue that Gamasutra's Matt Matthews tackled earlier this week.

In a 2012 interview with Gamasutra, GameStop president Paul Raines claimed that 70 percent of income that the company pays to customers for traded goods, or $1.8 billion, is immediately spent on new games.

It's also worth remembering that the report only surveyed the Japanese video game market, and that the data involved came from sales made between 2004-2008, meaning that it only includes data on the first few years of the current console cycle.

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